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How Do Employers Feel About Binding Arbitration to Resolve Fee Disputes, Legal Malpractice Claims?

Employers' mandatory arbitration agreements are coming under close scrutiny in the aftermath of a high profile case involving defense contractor KBR's (a Halliburton subsidiary) attempt to compel Jamie Leigh Jones to arbitrate claims of rape and harassment against the company.  KBR contends that Jones' employment agreement requires arbitration of all disputes arising out of employment with the company.  (For discussion of the pros and cons of use of arbitration in the Jones case, see The Consumerist and Overlawyered.) 

Today, the Wall Street Journal carries this article on the increasing use of mandatory arbitration agreements by employers, and the WSJ Law Blog asks, are plaintiffs better off in court or arbitration? Daniel Schwartz of Connecticut Employment Law Blog clarifies that while many employers are using arbitration agreements, it's by no means a majority.  And Schwartz also points out that arbitration isn't right for every employer.  Meanwhile, the team at the Georgia Injury Lawyer Blog strongly objects to employer arbitration agreements, arguing that arbitration clauses inconvenience plaintiffs and deprive them of important rights to have their cases heard in court.

Of course, employers don't have a lock on use of arbitration agreements.  For example, this article addresses the legality of "Do Not Sue" agreements used by medical professionals.  And ABA Formal Opinion 02-425 holds that lawyers can ethically require binding arbitration of fee disputes and malpractice claims "if client has been apprised of advantages and disadvantages and given sufficient information about the provision -- and arbitration provision does not insulate lawyer from liability to which he'd be exposed under common law."  (Note -- some states may impose additional restrictions on lawyers' ability to force clients to arbitrate malpractice claims.)   

With malpractice claims against law firms on the rise, most law firms may find mandatory arbitration agreements beneficial, if only to keep the claims against them outside of the public eye and the public dockets.  So, I wonder: Are employers and lawyers consistent about their position on arbitration when it impacts them personally?  Do those lawyers who object to binding arbitration ever implement these provisions in their own retainer agreements?  And do those employers who favor mandatory arbitration balk about signing a retainer agreement that requires them to arbitrate fees?  I don't know the answer, so if you have any insight, please post a comment below.

Posted by Carolyn Elefant on December 18, 2007 at 01:39 PM | Permalink | Comments (2)

Comments

Very interesting post Carolyn. I suspect we haven't seen the end of this "wave" of arbitration and it will continue until the costs of litigation slow down. Even with the downsides of arbitration, the ability to control costs may ultimately be the main reason why people choose to go down this road.

Posted by: Dan Schwartz | Dec 18, 2007 3:08:41 PM

I wonder about the received wisdom that arbitration costs less than litigation. As an example, a client with a $1 million claim in legal malpractice can get a trial for $ 210 in NY, while the arbitration fee is $ 50,000. A $ 20 Million claim costs even more. All other costs seem to be the same in arbitration and litigation, such as attorney fees, transcript costs, discovery reproduction costs.

Posted by: Andrew Lavoott Bluestone | Dec 27, 2007 5:34:36 AM

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